For years, I’ve heard people talk about the fact that Fibre Channel over Ethernet (FCoE) is a technology that only Cisco is pushing or that it is a push by a dying Fibre Channel (FC) industry to extend product lives for a few more years. First of all, FC is still doing well (recent earnings from Brocade, Emulex and QLogic were all positive) and any transition from FC to Ethernet will still take many years (see my 2011 storage networking predictions). This week there were significant announcements by Intel and HP that reinforce that converged networking is much more than a Cisco initiative. FCoE will still be a minor player in the overall SAN market this year, but the ecosystem and customer adoption continue to move forward.

Today, Mellanox announced plans to buy Voltaire for $218M. This is not a surprising move – Voltaire was a customer of Mellanox InfiniBand silicon yet the two companies often were competing head-to-head in the switch market which was driving down the price of both of their businesses. I heard that OEM customers had been pushing for this marriage of companies for some time so that they can join forces on the low latency marketplace. Voltaire has a Low-Latency Ethernet product which does not use Mellanox silicon, but I would expect that it will convert to the in-house solution in the future. While the InfiniBand market has had good growth, consolidation of the supply chain makes sense, vertically integrating to suppliers that provide chips, adapters and switches. QLogic went from a customer of Mellanox to a competitor with the acquisition of SilverStorm in 2006. Mellanox is the lead supplier of InfiniBand chip technology and now with Voltaire being acquired by Mellanox, we have a horse race with QLogic as the other end-to-end InfiniBand solution provider from chips and switches.

Commoditization of IT, moving to more standardized components is a force that affects every product line across the industry. Looking at the details of any server or storage device will show the impact that Intel has had. Network switches have specialized chip designs that differ from processors, but face the same competitive pressures of creating new generations of products at a lower cost with more functionality. The move to standard switch components has moved significantly over the last decade and is creating a shift in the economics of the switch market. Specifically, hardware value is flowing from the switch vendors (Cisco) to suppliers of switch silicon (Marvell, Broadcom, QLogic). The implication is that to maintain margins, switch manufacturers will need to look for alternative value streams.

Today in NYC, QLogic launched a new product line – a 10Gb Intelligent Ethernet adapter, Converged Network Adapter and Converged LOM – and presented their strategy to financial analysts. While a third generation product family announcement may not sound exciting, QLogic’s announcement of converged networking products is not just another turn of the crank. The solutions that can be deployed increase the FCoE ecosystem and give customers and vendors unprecedented flexibility for 10Gb Ethernet solutions. QLogic also shared its vision the full data center portfolio including security and virtualization components.

Virtualization changes almost everything. It doesn’t change the laws of physics, but it does impact networking in many other ways. At VMworld 2010 in San Francisco, Wikibon co-founder Dave Vellante and SiliconANGLE founder John Furrier sat down with QLogic SVP Scott Genereux to discuss the impact of virtualization on networking and how QLogic is uniquely positioned in the market. Genereux states that only QLogic can meet the broad needs of OEMs, supporting FC, Ethernet (iSCSI and FCoE) and InfiniBand solutions.

Last week Stu Miniman blogged that QLogic CEO H.K. Desai announced to Wall Street on its earnings call that it had begun revenue shipments of its converged network adapter (CNA) product to Oracle. SiliconAngle then followed up Stu’s blog with a post positing that the deal was an exclusive. I haven’t been able to confirm the exclusive but the guys at SiliconAngle are right more often than wrong on these things as they’re heavily plugged into the Silicon Valley insider scene. Normally firms like to dual source adapters but Sun was one firm that was prone to do exclusives and limit its supplier base—so I suspect SiliconAngle’s take is correct and Oracle is continuing that trend.

As usual, Intel’s earnings were a bellwether for the high tech market. Since their positive earnings last week, Apple, EMC, VMware and now QLogic have had solid earnings.

Summary of Remarks from QLogic CEO H.K.Desai

QLogic reported a Net Revenue of $142.6M, “a 16% increase in net revenue and a significant increase in profitability from the first quarter of last year” and seeing growth on FC HBAs, InfiniBand and Converged Network products. Gross Margin corporate average sits around 65% (forecast for the next quarter is 65.5%-66%). Some general macro economic “nervousness”, especially in Europe.

What is the best protocol for virtualized environments? For years we’ve been hearing arguments for NFS, iSCSI and FC (and more recently FCoE). This week HP sent a strong message with their Virtual Connect Flex Fabric launch that the answer is YES! In the new BladeSystem G7, customers can Wire Once and support NFS, iSCSI, FCoE or FC. This is an industry first for a switch module which can dynamically support FC and Ethernet.

There is a great write-up of the new BladeSystem G7 on Kevin Houston’s Blades Made Simple blog (the photo above is also from his site).